1. In your own words, summarize Microsoft’s problem.
The market is starting to focus on cloud computing which is a big problem for Microsoft because the idea of cloud computing would render some of their most successful services as outdated or obsolete. In turn, they are have to create software to compete in this cloud computing era, and by doing so, they are taking business away from their own services.
2. Explain the meaning of the following: “. . . you can purchase an hour of a mid-range server for 24 cents. Let’s assume the cost of running that server is a little less than half, say, 10 cents. Because Rackspace can sell an hour on a bare server for a penny and a half, it’s likely that a big part of that 24 cents is a license for Windows Server, and the true marginal cost to Microsoft is probably much less than 10 cents as well.” The mid-range server purchase has a portion of the this 24 cent charge that is directed towards the Microsoft licensing fee. Since Microsoft owns this, they then keep the profit to take the place of the money lost by users not having their own on-site Exchange server.
3. How does the example Office 365 marginal revenue analysis change if the cost of running that server is 1 cent, not 10? If the running cost is 1 cent instead of 10, the marginal revenue will increase substantially. $1,440 – (8760 * $.01) = 1,440 – 87.60 = $1,352.40
4. How does the example Office 365 marginal revenue analysis change if that server supports 2,000 users, not 20? The marginal revenue analysis would increase dramatically going from just 20 users to 2000 users. 2,000 * $6 = $12,000 $12,000- $876 = $11,124
5. As of this writing, Microsoft had just purchased Skype. Its reasons for doing so are unclear at present (August 2012), but most likely involve the problems addressed in this case study. By the time you read this, Microsoft’s Skype strategy should be clear. Describe what it is and how it changes this analysis. I cannot seem to find a clear strategy just yet for the purchase of Skype. With it’s competitive strategy of transitioning into cloud computing, they could be trying to tap into the area of video conferencing as well because of its rapidly growing market. Video conferencing and conference call applications are used by companies, schools, and normal day-to-day users frequently. Tools such as Skype and GoToMeeting are great examples and can save companies time and money they would normally spend buying a plane ticket or scheduling a meeting. These tools are helping reduce the necessity of face-to-face meetings, much like Office 365 is replacing the necessity of an in-house Exchange server.
6. Over the years, Microsoft has devoted considerable resources and time to building a network of loyal ISVs. It provides training, sales support, conferences, and awards and even has categories of gold-, silver-, and bronze-level partners. From this case study, it appears to be throwing these ISVs under the bus. Do you think that it is? Why or why not? If you were an ISV, what would you do? I think that the ISVs are becoming useless or obsolete with the creation of this technology, but at the same time, in a competitive market the idea is to make as much profit as possible. It almost seems as though the ISVs are just leeching off others’ success because of the fact that they rely 100% on the main companies to provide them work. I don’t think it is wrong by any means or throwing them under the bus. The best idea for the ISVs at this point would be to hop on board with the main companies like Microsoft, maybe get a deal worked out to help them craft or update their software as it progresses. Other than that, I do not see much for them.
7. If you were Microsoft and you had a $15 billion server business that was threatened by the cloud, what would you do? There really is only one thing to do at this point. The world of technology is evolving every single day, if you don’t adapt and evolve with it, then you get left behind. If I were Microsoft, I’d being doing exactly as they are and adapting to the new direction technology has taken us. The company has to adapt to stay competitive with the more inexpensive and more convenient advantages of the cloud or else get left in the dust.
8. What are your thoughts on the future of the cloud as well as a three advantages and disadvantages of using the cloud? The cloud has revolutionized the way we use computers and the internet. Companies of all kinds are trending towards the cloud as we see a great example in this case study. The cloud offers so many different perks it is easy to see why our society is quickly moving to the cloud. Advantages:
Access data from more locations
Can buy exactly the amount of cloud computing needed
May have less control in certain aspects when using public clouds Certain platforms, OS, applications may not run on certain cloud providers The biggest disadvantage in my opinion would be have all the data on the cloud could potentially be risky from a security standpoint. As of now it is alright, but how long until the cloud’s security becomes vulnerable. (http://www.expedient.com/products/cloud-computing/advantages.php)